The Poverty Bay Herald. AND East Ooast News Letter. PUBLISHED EVERY EVENING.

Poverty Bay Herald, Volume VI, Issue 845, 26 July 1879, Page 2

The Poverty Bay Herald. AND East Ooast News Letter. PUBLISHED EVERY EVENING.

SATURDAY, JULY 26, 1879.

How far the present monetary and commercial depression throughout the Colony, or we may say, the world, is attributable to the actions of our banking institutions, is a matter for grave consideration, and a review of all that has lately transpired m connection with them, points to the necessity of some change. Formerly, banks paid no interest upon fixed deposits. Their business ■was limited to the legitimate operation of working their own paid-up capital, by discounting bills for their customers, advancing upon wool and other produce. Things were then tolerably prosperous. In course of time, business increased, new banks sprung into existence, and to obtain customers, the system of , giving interest on deposits was introduced, rising as high as six per cent. In adopting this system, the banks departed from sound banking pi'inciples, and thus has been the catise of much of the present depression. A large amount of capital has been drawn from the legitimate channels of trade to swell the working capital of banks. Business men have found their business circumscribed, and their pi-ofits becoming smaller and smaller, owing to the competition of these institutions. They have absorbed that capital which should have been spread over large areas, and having got command of the country's capital they have also taken command of its business. Depositors have delegated the work to the banks that they should hava bad the enterprise to perform for themselves. It is a common expression, " Why should I speculate m industrial ventures, when my money m the bank is giving me good interest 1" and so long as the interest was so easily obtained all went well. No effort was made to foster new industries, to help the needy, to promote works of a reproductive nature. As the river fertilises its banks as it flows on, so. does capital m active circulation tend to enrich those whoaßsistinthatcirculation. The banks having so much of the country's capital upon fixed deposits, fresh sources of profit had to be found m order to pay interest, expenses of management, and to provide for losses. Advances have been made upon large estates, business restricted, and money withdrawn from local cir-

dilation. To invest money m securities not readily convertible, may be all very well while the sunshine of prosperity lasts, but when commercial clouds gather, and the storm of disaster follows, all alike feel the pressure ; honest-dealing men are driven to the veage of bankruptcy, while reckless adventurers reap the advantage. Commercial crises usually last from one to two years, and according to Henry Ward Beecher, recur m America and Australia every ten years, m England every twentyfive years, and m Holland once m a hundred years. In New Zealand, we do not know the precise period of its recurrence, but that we are suffering from a monetary crisis at the present is undoubtedly a fact. Much of it is due to preventable causes, which can, if the banks confine themselves strictly to their legitimate business, be avoided, and a recurrence of these crises indefinitely postponed.